Cracker Barrel in for a fight

Updated 10:29 am, Friday, April 5, 2013

Sardar Biglari says, “It took Ali eight rounds to knock out Foreman. It may take us eight years to win.”

Sardar Biglari says, “It took Ali eight rounds to knock out Foreman. It may take us eight years to win.”

Cracker Barrel in for a fight

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NEW YORK — Despite badly losing two proxy fights with Cracker Barrel, San Antonio activist investor Sardar Biglari said Thursday he's invested in the restaurant and retail chain for the long haul.

Speaking at the annual shareholders' meeting of his Biglari Holdings Inc. on Thursday, Biglari likened his battle with Cracker Barrel to the famous 1974 “Rumble in the Jungle” heavyweight bout between Muhammad Ali and an undefeated George Foreman.

“It took Ali eight rounds to knock out Foreman. It may take us eight years to win our prize proxy fights,” Biglari said. “We have the time horizon. We will outlast whoever we need to outlast.”

While Biglari has failed to win seats on Cracker Barrel's board, the investment has paid off. Biglari Holdings' almost 20 percent stake in Cracker Barrel now is worth about $380 million, he said.

Biglari can't increase the stake, though, because that would trigger a “poison pill,” or shareholders' rights plan. If he went over that threshold, the plan would give shareholders other than Biglari Holdings the right to purchase Cracker Barrel shares at a discount to their market price. That would have the effect of diluting Biglari Holdings' shares.

How the feud with Cracker Barrel management will end remains to be seen.

“I don't even know exactly how it's going to play out when there are so many different options available to us,” Biglari said. “It really is a function of how they perform.... What are they going to do with their capital allocation? What does the stock price do?”

At Thursday's meeting in New York's St. Regis Hotel, attended by about 100 investors and money managers, Biglari reiterated plans to expand Steak 'n Shake by adding 1,000 franchisee locations. But he wouldn't give a timeline for achieving that goal.

“We've invested a lot of money in getting this established, said Phil Cooley, Biglari Holdings' vice chairman and a Trinity University business professor who had Biglari as a student. “We have people in various parts of the world who are working on this.”

The company has a contract with an individual to open 40 restaurants in the United Arab Emirates, Cooley said, and it has relationships with some Jordanians who will cover several Middle Eastern countries. Biglari Holdings also is working in Asia and Latin America, as well as the United States.

Steak 'n Shake's earnings before taxes tumbled in Biglari Holdings' latest quarter from $13.6 million in the three months ended Dec. 21, 2011, to $8.5 million in the same period in 2012.

“Clearly the business has slowed down, and we need to reignite it,” Biglari said.

Steak 'n Shake launched a late-night service from midnight to 6 a.m. to boost sales and profits. He described that as successful but acknowledged that the chain's business has weakened during lunch and dinner.

“Come May 1st, we're going to launch a new campaign,” he said. That includes lowering prices, introducing a new menu, rolling out a “re-image” of the restaurants, and heavily promoting them.

“I have full confidence it will do well,” Biglari said.

Biglari Holdings shares rose $3.52, or 0.94 percent, to close at $376.76 Thursday.